New Data for Answering Old Questions Regarding Employee Stock Options

This paper is a description and summary of existing questions and sources of data on stock options with an emphasis on two issues; what are the issues surrounding stock options in the national accounts and what value do employees place on stock options? We survey many existing data sources and outline some of the ways these data can be used to answer questions about the use and impact of employee stock options. The data sources include administrative records from individual firms, survey data of employee perceptions, disclosure filings with the SEC and other government, nonprofit, and international sources. We explore ways to investigate the value of options to employees and their cost to the firms using data on employee exercise decisions. Finally, we discuss the implications of our findings for public policy, the reporting of stock options, and how options are considered in the national accounts

The Value of Stock Options To Non-Executive Employees

This study empirically investigates the value employees place on stock options using information from the option exercise behavior of individuals. Employees hold options for another period if the value from holding them and reserving the right to exercise them later is higher than the value of exercising them immediately and collecting a profit equal to the stock price minus the exercise price. This simple model implies the hazard describing employee exercise behavior reveals information about the value to employees of holding options another time period. We show the parameters of this model are identified with data on multiple option grants per employee and we apply this model to the disposition of options received in the 1990s by a sample of over 2000 middle-level managers from a large, established firm outside of manufacturing. Exercise behavior is modeled using a random effects probit model of monthly exercise behavior that is estimated using simulated maximum likelihood estimation methods. Our estimates show there is substantial heterogeneity (observed and unobserved) among employees in the value they place on their options. Our estimates show most employees value their options at a value greater than the option’s Black-Scholes value

Employees’ Choice of Method of Pay

Who chooses what type of pay? The costs and benefits of “flexible” and “cafeteria-style” benefit plans have been discussed for some time. Additionally, many papers have considered the potential costs and benefits of certain types of pay plans (e.g. salaries versus piece rates). In this paper, we use detailed data from a specific firm that annually set the total compensation level for each of its employees but then did something extremely unusual. At the start of each pay year, the firm set an exchange rate for the dollar trade-off between cash pay and stock option pay. It then gave every employee nearly complete choice over the fraction of their pay that was contingent (stock options, bonus) versus guaranteed (salary). There are several empirical findings. There is substantial variation in the choice of contingent pay with some workers choosing almost all base pay and others choosing almost entirely stock options. Younger employees, more experienced employees, higher paid employees, and male employees are more likely to allocate a larger fraction of their total compensation to at-risk alternatives. The robustness of these results varies somewhat depending on the empirical specification and set of covariates used

High School Inputs and Labor Market Outcomes for Male Workers in Their Mid-Thirties: New Data and New Estimates from Wisconsin

This study presents new evidence on the relationship between high school inputs measured at the time male respondents attended high school and the earnings of these same individuals when they were in their mid-thirties. To accomplish this task, we matched newly coded data on the characteristics of Wisconsin high schools in 1954–57 to the Wisconsin Longitudinal Survey. Our estimates show a significant relationship between the characteristics of teachers and the earnings of their students 17 years after graduation. Specifically, a 1 percent increase in the average teacher salary in a district increases the earnings of students by 0.33 percent. The magnitude of this effect is larger than estimates reported in previous research and many times larger than the impact of increasing parents’ income by a comparable amount.

An Unusual Cause of Abdominal Ascites.

Abdominal ascites is most commonly caused by portal hypertension from liver cirrhosis. When present, portal hypertension is associated with an elevated serum-ascites albumin gradient (SAAG) ≥1.1 g/dL. In contrast, a SAAG < 1.1 g/dL suggests malignancy, tuberculosis, pancreatitis, or nephrotic syndrome. Here, we present a case of low SAAG ascites caused by epithelioid peritoneal mesothelioma in a woman with no known liver disease. The diagnosis proved elusive until diagnostic laparoscopy with biopsy was performed

Viscous/potential flow about multi-element two-dimensional and infinite-span swept wings: Theory and experiment

The viscous subsonic flow past two-dimensional and infinite-span swept multi-component airfoils is studied theoretically and experimentally. The computerized analysis is based on iteratively coupled boundary layer and potential flow analysis. The method, which is restricted to flows with only slight separation, gives surface pressure distribution, chordwise and spanwise boundary layer characteristics, lift, drag, and pitching moment for airfoil configurations with up to four elements. Merging confluent boundary layers are treated. Theoretical predictions are compared with an exact theoretical potential flow solution and with experimental measures made in the Ames 40- by 80-Foot Wind Tunnel for both two-dimensional and infinite-span swept wing configurations. Section lift characteristics are accurately predicted for zero and moderate sweep angles where flow separation effects are negligible

Heat transfer in a compact tubular heat exchanger with helium gas at 3.5 MPa

A compact heat exchanger was constructed consisting of circular tubes in parallel brazed to a grooved base plate. This tube specimen heat exchanger was tested in an apparatus which radiatively heated the specimen on one side at a heat flux of up to 54 W/sq cm, and cooled the specimen with helium gas at 3.5 MPa and Reynolds numbers of 3000 to 35,000. The measured friction factor of the tube specimen was lower than that of a circular tube with fully developed turbulent flow, although the uncertainty was high due to entrance and exit losses. The measured Nusselt number, when modified to account for differences in fluid properties between the wall and the cooling fluid, agreed with past correlations for fully developed turbulent flow in circular tubes